Bloomberg News

R.J. Reynolds Loses Bid for Appeal of $28.3 Million Verdict

July 19, 2011

(Updates with court order in second paragraph.)

July 19 (Bloomberg) -- Florida’s Supreme Court declined to hear R.J. Reynolds Tobacco Co.’s appeal of a $28.3 million verdict in a case that the cigarette maker argued may affect thousands of so-called Engle tobacco claims in the state.

The court, in a one-page order today, turned aside the company’s bid for an appeal of the 2009 verdict in favor of Mathilde Martin, who claimed her husband, Benny Ray Martin, died from a smoking-related disease. The decision leaves in place a lower state appeals court ruling that affirmed the verdict.

Reynolds, a unit of Winston Salem, North Carolina-based Reynolds American Inc., sought to have the Florida Supreme Court review the lower appeals court ruling, arguing that the trial court misapplied a 2006 decision by the Florida Supreme Court in the Engle case. The Engle decision ended a statewide class action filed on behalf of Florida smokers.

In the 2006 ruling, named after Howard Engle, the lead plaintiff in the class action, the court said that some jury findings in the case could be applied by former class members who file individual claims.

Reynolds to Appeal

David Howard, a spokesman for R.J. Reynolds, said the company is disappointed the Florida Supreme Court won’t review the lower court’s decision, which he said deprived the company of its constitutional right to a fair trial. Reynolds will try to appeal to the U.S. Supreme Court, Howard said.

“This signals that Engle remains good law, now and forever, in Florida,” said Matt Schultz, a lawyer for Martin.

Altria Group Inc.’s Philip Morris USA unit, the biggest U.S. cigarette maker, faces claims from about 8,900 Engle plaintiffs, the company said in its most recent quarterly filing with the Securities and Exchange Commission. About 8,600 have filed claims against Reynolds, the company said in its quarterly SEC filing. About half the claims are filed in state court, half in federal court.

Smokers and their families have won verdicts in about two- thirds of the 44 or more Engle claims tried to verdict, including one for $80 million against Reynolds in November.

Engle, a Florida pediatrician who died in 2009, was the lead plaintiff in a statewide class action filed in 1994 on behalf of smokers who were addicted to nicotine and developed cancer or other smoking-related illnesses as a result.

Three-Phase Trial

In the first part of what was intended to be a three-phase trial, a Miami jury decided a series of common questions relating to the companies’ conduct and to the health effects of smoking. In the second phase, the jury awarded $145 billion in punitive damages to the class.

In its 2006 ruling, the Florida Supreme Court rejected the $145 billion verdict and ruled that the case couldn’t continue as a class action.

At the same time, Florida’s high court upheld most of the Phase I factual findings and said they would apply in all of the individual suits filed by smokers who had been part of the Engle class. The U.S. Supreme Court declined to review the case.

The Engle findings, which include that the companies sold defective products, concealed the dangers of smoking and acted negligently, typically are read to jurors by Florida judges in cigarette liability cases.

The companies argue that trial judges, in the Martin case and others, have applied the findings too broadly and aren’t requiring smokers to prove all the elements of their claims.

Benny Martin, a long-time smoker of Lucky Strike cigarettes, died of lung cancer in 1995. A jury in Pensacola, Florida, found Reynolds 66 percent responsible and Martin 34 percent responsible, awarding $3.3 million plus $25 million in punitive damages.

The case is R.J. Reynolds Tobacco Co. v. Martin, SC11-483, Florida Supreme Court (Tallahassee).

--Editors: Fred Strasser, Stephen Farr

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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